To Keep Catalonia In, Spain Should Allow a Vote to Secede

Oct. 16 (Bloomberg) -- It is a truth believed by nations
around the world that their borders are God-given and immutable.
It’s also false.

Frontiers change. The important question -- as Standard &
Poor’s downgrades Spanish debt to a grade above junk and
Catalonia contemplates a referendum to secede -- is when
breaking up is right.

That’s hard even for outsiders to judge dispassionately,
but as Europe’s debt crisis washes away some of the
redistributive glue that has held together the continent for the
past half-century, it’s also important. Scotland and Catalonia
plan referendums on secession from two of Europe’s largest
economies as soon as 2014, and others may follow -- this
weekend, a Flemish separatist won an election to become the
mayor of Antwerp, Belgium.

In the case of Catalonia, there is a thicket of historical,
legal and economic issues to cut through. Catalans speak a
distinct language, were once separate from the rest of Spain,
and contribute more in tax to Madrid than they receive back -- a
net annual loss of 8 percent of the region’s gross domestic
product, according to the government in Barcelona, although
that’s probably an overstatement.

New Resentments

Catalonia also suffered severe repression during the
dictatorship of General Francisco Franco. Things have been much
better since, with Catalonia and Spain’s 16 other regions
gaining substantial autonomy. But democratic Spain never reached
a full settlement between the Castilian center and the regions,
and in 2010, Spain’s Constitutional Court watered down a new
Catalonia settlement that the Spanish parliament had approved
four years earlier.

Now Spain’s economic crisis has led to renewed
centralization and resentment, as Prime Minister Mariano Rajoy
seeks to impose more budgetary control on the regions. Last
month, more than 1 million Catalans turned out to demonstrate
for independence on La Diada, Catalonia’s national day, which
celebrates (or mourns) defeat and submission to Madrid in 1714.

The turnout surprised everyone. President Artur Mas called
early elections for Nov. 25, and said that if he gets a mandate
he’ll call a referendum on independence. Legally, Spain’s
constitution doesn’t allow for one -- by contrast the U.K.’s
laws do give Scotland the right to a vote. But would secession
improve life for Catalans and Spaniards?

Probably not, and especially not now. Catalonia represents
about 16 percent of Spain’s population, 20 percent of the
economy and 30 percent of exports. A contested bid for
independence and disruption of payments to the center would
probably topple Spain’s fragile finances, with unpredictable
consequences for Catalonia, Spain and the rest of the euro area.

Not all of the arguments for independence are
straightforward. Catalonia is a long way from being all Catalan.
Between 2000 and 2011, its population rose from 6.2 million to
7.5 million, with immigrants who came from outside Spain
accounting for 1 million of the increase. A large if difficult-to-determine proportion of the remaining 6 million were born in
other parts of Spain. One way to look at who comes from where is
by examining language. Although schools in Catalonia are taught
in Catalan, 44 percent of the population can’t write in the
language, indicating that it may be their second tongue.

Moreover, Catalonia’s economy is intricately connected to
the rest of Spain. Hong Kong’s Hutchison Port Holdings Ltd. is
investing as much as 500 million euros ($647 million) to expand
Barcelona’s port to service 110 million consumers in Spain and
France, not just the 7.5 million in Catalonia. The central
government is building the new rail link required.

Bailout, Please

A contested divorce would hurt Catalan economically. That 8
percent of GDP transfer to Madrid would be eaten up quickly by
the increase in bureaucracy and services that Catalonia would
have to replicate for itself. Catalonia has a debt problem of
its own and is seeking a bailout from Madrid while calling for
independence. An independent Catalonia wouldn’t automatically
get to join the EU -- Spain, as an existing member, would
probably have the right to veto that.

Given all those complications, the most likely outcome is a
lengthy negotiation. The challenge for both sets of leaders is
to avoid scorched earth tactics that spook markets and damage
the economy.

Secession doesn’t need to happen to keep a majority of
Catalans happy. Even now, opinion polls suggest a referendum for
independence would be very tight, with 51 percent saying yes. As
recently as 2007, support for independence was 15 percent. It
wouldn’t take much to reverse the trend.

Things have come to this pass primarily due to the
ineptitude of the ruling People’s Party in Madrid, which
complains that Catalonia’s leaders are taking advantage of
Spain’s economic weakness to push their own political agendas.
There’s something to that, but Spain needs to settle on a
constitutional arrangement and tax distribution that both sides
can accept. It isn’t a question of no tax transfers, but a new
agreement on the amounts. The Basques already get a better deal
than the Catalans.

The People’s Party also needs to stop pushing
centralization and Spanish nationalism. On Oct. 11, Education
Minister Jose Ignacio Wert said he wants to “Hispanicise”
pupils in Catalonia, following on his demands to centralize the
school curriculum to reflect a more Spanish version of history.
Such moves are needlessly provocative and he should reverse
them.

The central government should also cede more regional
control over infrastructure such as Barcelona’s airport. Above
all, Spain should follow the U.K.’s example by granting
Catalonians the right to hold a referendum on independence and
conduct a legal, orderly secession if they want to. Last week,
Spain’s parliament voted against doing so, and it was a mistake.
Without the right to determine their statehood for themselves,
Scots would be enraged. Instead, they’re agonizing over whether
it’s really in their interests to leave the U.K. in 2014, no
matter how much they love to hate the English.

By allowing Catalans a free choice in a legally sanctioned
referendum, Spain’s government would go a long way toward
winning the vote.

Today’s highlights: the editors on Romney’s still-missing
numbers; Edward Glaeser on the winner of the economics Nobel;
Jeffrey Goldberg on Republicans using the Benghazi attack to
undermine Obama; Michael Kinsley on checking candidates’
arguments instead of facts; William Pesek on “Gangnam Style”
and South Korea’s economy; Ramesh Ponnuru on why both candidates
are wrong on China; Carmen M. Reinhart and Kenneth S. Rogoff on
why U.S. financial crises aren’t different.